UK house price growth continues to accelerate

The UK housing market accelerated towards the end of 2016, with new figures from the Office for National Statistics (ONS) and the Land Registry confirming that £3,000 was added to the value of the average house in December.

The newest UK House Price Index confirms that the UK market is in good health. Not only did December see the aforementioned average rise of £3,000, the year as a whole saw property values increase by 7.2% across the UK compared to the previous year. This left the average value of a house in the UK at £219,544 at the close of the year.

The main contribution to this nationwide growth came from England, where prices rose by an average of 7.7% over 2016. Within that, prices in the East of England saw the sharpest rise, with average growth of over 11% recorded. Even in the North East, the site of the lowest average annual growth in England, properties increased in value by over 4%. The highest individual value is to be found in London, of course, where the average reached £483,000.

The main question which arises from this good news is as follows: will this growth carry on over 2017?

The main concerns raised by outlets such as the Financial Times are the looming changes to the buy-to-let market which were signposted in 2016. Changes such as the upcoming abolition of lettings fees and the increased taxes levied on landlords have been cited as factors which might deflate the market on top of the general unaffordability of housing which has deterred many potential new faces on the housing ladder.

However, the actual information and statistics from the industry seem to contradict this.

Recent news from the Council of Mortgage Lenders (CML) shows that the rate at which first time buyers are borrowing is somewhat mirroring the growth in house prices discussed earlier. The CML confirm that December was a record month, with £4.8bn being borrowed by first-time buyers looking to enter the market. This was the cap on a record year which saw lenders pay out more than £53bn to first-time buyers – an increase of 13.5% over 2015.

Existing landlords also joined the market towards the end of 2016. Figures from Landlord Today show that buy-to-let lending returned to its normal levels towards the end of the year. Moreover, the number of people remortgaging their existing properties in order to fund further buy-to-let purchases rose to 38% in the final quarter of 2016 according to the Mortgages for Businesses buy-to-let index.

And what of the continuing imbalance between supply and demand? The recent Government white paper on housing showed that this is becoming a major issue, and pledges to build many more homes and incentivise developers to build on their land rather than let it lay empty. But these houses will not be built for many years yet and, in the meantime, huge numbers of people from all ages will continue to rent. Many are in fact happier to rent and have no desire or intention to buy a house in the future.

When record house prices are combined with a huge increase in lending to first time buyers and an ongoing problem with supply and demand, it is clear that there is much resilience in the market and that buyers continue to have confidence in their property purchases.